1. War Room 30 July 2013 Obam(aca)re – Future of Health Care

2. War Room Monthly macro discussion Using tools in context Update on HiddenLevers Features Your feedback welcome

3. Obam(aca)re: Future of Healthcare I.Affordable Care Act – What’s in the bag? II.Obamacare – Impact on Employers III.Obamacare – Winners + Losers IV.Scenarios

4. HiddenLevers AFFORDABLE CARE ACT – WHAT’S IN THE BAG?

5. US Healthcare – Something had to be done Healthcare Spending US ranks first Per capita ($8608/year) Percentage of GDP (18%) Quality of healthcare US ranks last among first world countries bad ROI on public + private spending System = broken 50million uninsured (16% of population) Medical debt contributes to 60% of bankruptcies 25% of senior citizens declare bankruptcy due to medical expenses sources: US Census, World Health Organization, Commonwealth Fund Guys… I got this.

6. HiddenLevers data US Healthcare – Costs Contained as of Late source: Manhattan InstituteManhattan Institute data Watch out for biased research on Obamacare

7. Affordable Care Act – Nitty Gritty Mandate Health care exchanges: Online marketplace to shop around for healthcare plans US residents can get their own, or continue with their employer- based coverage Uninsured face penalties Tax credits for low income households to cover healthcare Medicare Cost Cuts = $700b Cuts already made in Fiscal Cliff deal Medicare payment board (IPAB) empowered to cut costs Reductions for re-admissions Lower premium subsidies payments to provider based on productivity/outcome Medicare Advantage program gutted DELAYED ENFORCEMENT 2013 until 2015 sources: Center for Medicare + Medicaid ServicesCenter for Medicare + Medicaid Services

8. Obamacare – Rhetoric vs Reality Political rhetoric Massachusetts experiment is going great Opponents of ACA are opponents of universal healthcare Obamacare will help the US catch up to the rest of the first world Obamacare = Freedom Political Reality Building + running exchanges is going to be difficult – IT challenge Higher premiums for most, more comprehensive coverage Premium hikes likely undercut coverage expansion Health care cost inflation not controlled directly Lots of concessions to healthcare industry Politicians: never ever two faced. Previous healthcare program hiccups: CHIP Medicare Part D

9. Obamacare – Will Young Americans Dodge? Moms - desperate to have insurance for kids Insurance profile of 8yr old = excellent After infants cross 1 year mark, they are super cheap on system. 77% of 18-25 year olds - healthcare is very important Penalty = 2.5% of income vs cost of insurance ~$150 for a 26year old in California You’re not young forever. I’ve never been young. No way I’d buy health insurance. source: Washington PostWashington Post We need these people to participate Penalty will hurt within 2 years

10. Affordable Care Act – Know your stuff cost cuts to Medicare employer-based coverage the youts incentives

11. OBAMACARE – IMPACT ON EMPLOYERS HiddenLevers

12. Employer-Based Coverage As Health advances drove up cost in 1920s, new forms of payment needed – enter Blue Cross Why it Arose Challenges Today Natural risk pool – employment not typically tied to your future health Healthcare costs have risen faster than inflation for decades Tax deductibility and third party payment act as steroids for health care cost growth Tax deductions enacted during WWII and 50’s fueled growth – benefits as compensation US firms complain of competitive disadvantage as they bear health care costs source: EH.netEH.net

13. Employer-based Coverage: History Employer-based coverage 9% in early 1940s 70% in 1960s Tax breaks for health benefits fueled this expansion in ’40s and ‘50s Health Insurance 1940-1960, USA But… Employer-based healthcare waning since late 1990s Source: Source Book of Health Insurance Data, 1965

14. Health Sector Grows, Others Stagnate Endless rising employment? Healthcare employment has risen through the recession while all other sectors stagnate. This shift between sectors puts tremendous pressure on employer healthcare model. Source: Brookings Institute Health care gobbling up all resources

15. Obamacare + Employers: Review $2k/employee without coverage small companies exempt 40% tax on expensive plans enforcement delayed - 2015

16. Will Obamacare accelerate trend away from employer healthcare? Source: Heritage Foundation* Employer Plan Cost: $15475/yr Penalty Cost: $2000/yr Employer could drop coverage, pay the penalty, and provide a $13,475k raise to employees. Employer drops fast growing expense and HR overhead Might become common if Americans become used to buying health insurance directly *The Heritage Foundation has a vested political interest in the failure of Obamacare.

17. Employers Ditching Healthcare? 75% of company plans may have to scale back due to ACA excise tax Detroit may drop young retirees onto exchanges to cut costsonto exchanges to cut costs 30% of companies considering dropping insurance per McKinseyper McKinsey

18. HiddenLevers OBAMACARE – WINNERS + LOSERS

19. Obamacare – Winners pre-existing conditions pharma + preventative care health insurers newly eligible for Medicaid anyone under age 26 small business owners healthcare IT companies MFGs + industrials Municipalities

20. Obamacare – Losers healthy youth population discontinued health plans high deductible plans retailers restaurants hospitality hospitals + home health providers doctors + care givers

21. OBAMACARE SCENARIOS HiddenLevers

22. Obamacare – What does success look like? exchanges rollout on time Americans sign up on exchanges Medicare cuts stick big drop in percentage of uninsured healthcare cost inflation contained

23. Obamacare – What does failure look like? Congress overrides Medicare cost cuts no one signs up ranks of uninsured stays same or grows healthcare costs explode delays in rollout If that tech rollout is anything like the custodians we’re goners. Poor word choice doc.

24. Obamacare – Defunded via Govt shutdown? political brinksmanship analysis government shutdown threatened previous attempts failed smells like summer 2011 resurrection of Fiscal Cliff scenarios

25. Good Obamacare succeeds Bad Obamacare fails Ugly Obamacare defunded Obamacare – Scenario Outcomes If successful, Obamacare will make USA more competitive by lowering health care costs. Obamacare will fail if costs balloon, causing a drag on GDP growth. If attempts to defund the ACA force a government shutdown the US risks a replay of the fiscal cliff – and it’s difficult for the Fed to step up further.

26. HiddenLevers – Product Update Healthcare levers - Updated Non-correlated Securities Screener Proxy mappings for unknown symbols Coming soon: 1. Muni-Bond Crisis – Scenario Update 2. Integrations: Albridge eMoney Advisor